Macro Chapter 7

The following table shows the hourly output per worker measured as quarts of olive oil and pounds of pasta in Greece and​ Italy: Output per Hour of Work Olive Oil Pasta Greece 6 3 Italy 6 12 The opportunity cost of producing one more quart of olive oil in Greece is __(1)__ pounds of pasta. ​ The opportunity cost of producing one more quart of olive oil in Italy is __(2)__ pounds of pasta. ​ The opportunity cost of producing one more pound of pasta in Greece is __(3)__ quarts of olive oil. The opportunity cost of producing one more pound of pasta in Italy is __(4)__ quarts of olive oil.

(1) .50 (2) 2 (3) 2 (4) .50

__(1)__advantage is the ability of an​ individual, a​ firm, or a country to produce a good or service at a lower opportunity cost than competitors. While __(2)__ advantage is the ability of an​ individual, a​ firm, or a country to produce more of a good or service than competitors when using the same amount of resources. A country will always be an exporter of a good where it has a __(3)__ advantage in production. Absolute or Comparative

(1) Comparative (2) Absolute (3) Comparative

__(1)__ are goods and services produced domestically but sold to other countries. __(2)__ are goods and services bought domestically but produced in other countries. __(3)__ are taxes imposed by a government on imports of a good into a country. Tariffs/Imports/Exports

(1) Exports (2) Imports (3) Tariffs

Steel producers in the United States observe that foreign sales of U.S. steel have drastically declined due to stringent trade policies adopted by foreign governments. The lobbying efforts of U.S. steel manufacturers induced the domestic government to introduce a tax on the import of steel and help stimulate the domestic sales of​ locally-produced steel. Which of the following examples describes a similar government​ policy? A. A tariff introduced by the Mexican government on tobacco imports from Brazil in retaliation for unfair treatment of Mexican tobacco exports to Brazil. B. A tariff imposed by the Sri Lankan government on the import of cotton textiles from China in order to protect domestic producers from foreign competition. C. A production subsidy provided by the South African government to stimulate domestic production of a​ high-technology good with positive spillover effects. D. A production subsidy provided by the Indian government to an industry that generates substantial employment opportunities. E. A tariff applied on toy imports from China in reaction to incidents that certain Chinese firms were unable to meet international safety standards.

A.

New Balance manufactures shoes in the United​ States, so you might expect that the firm would benefit from a tariff on shoes. Yet New Balance did not actively oppose the Obama​ administration's attempts to eliminate the shoe tariff imposed on countries that would be part of the​ Trans-Pacific Partnership. New Balance did not voice strong opposition to the trade agreement because: A. the agreement would result in less competition for New Balance from foreign shoe sellers. B. the agreement would lower the cost of shoes and shoe parts that it imports from other countries. C. the tariff made it difficult for New Balance to hire labor in the U.S. D. All of the above.

B.

If the United States were to stop trading goods and services with other​ countries, which of the following U.S. industries would be likely to see their sales decline the​ most? A. Some service industries. B. Most of the agriculture industry. C. Most manufacturing industries. D. Only A and B. E. All of the above. F. None of the above.

E.

In the 2012 Summer Olympic​ Games, Ashton Eaton​ (from the United​ States) won a gold medal in the​ decathlon, which requires athletes to compete in 10 different track and field events. In one of these​ events, Eaton ran a​ 100-meter race in 10.35 seconds. In a separate​ event, Usain Bolt​ (from Jamaica) won a gold medal and set a world record by running 100 meters in 9.58 seconds. a. The concept of comparative advantage better explains A. ​Bolt's performance because he specialized in an event and had the fastest time. B. ​Bolt's performance because he is the​ better-known athlete. C. ​Eaton's performance because he competed in a decathlon. D. ​Eaton's performance because his time was only slightly higher and he competed in more events. b. Based on their performance at the 2012 Olympic​ Games, who was the better​ athlete? A. Bolt was the better athlete because his time was better in the​ 100-meter race. B. This cannot be determined because this is a normative question. C. They are equivalent atheletes because they both competed in the Olympics. D. Eaton was the better athlete because he competed in a decathlon.

a. A b. B